Pound Euro 2016 Levels Could Head Even Lower on Hawkish ECB

GBP EUR headed towards Pound Euro 2016 lows of below 1.10 once again on Monday as the Euro was boosted by Eurozone investor excitement ahead of Thursday’s European Central Bank (ECB) meeting.

The ECB is still widely expected to maintain a vague stance while continuing to state the importance of its easing measures, but the possibility of the bank tapering away its quantitative easing program has been the cause of much speculation in recent weeks.

As a result, the Euro could continue to firm as Thursday approaches, while UK investors could continue their struggle to decide whether or not GBP is appealing enough to purchase.

It should be noted again that even if Britain’s inflation stats impress on Tuesday, this may not inspire a Sterling relief rally as the Bank of England (BoE) reminded markets as recently as last week that it would overlook inflation spikes caused by low GBP value.

The UK is also set to publish employment figures and retail sales stats this week. If these reports indicate that the UK economy is weathering the post-Brexit storm well, the Pound may claw back some losses, but any upward movement is likely to be limited.

(Previously updated 13:33 BST 17/10/2016)

Monday’s session has done little to alter this week’s Pound Euro 2016 forecast, as the day’s British data failed to give Sterling traders any motivation as expected. Rightmove’s house prices report revealed that October saw an improvement from 4.0% to 4.2%.

The Euro, on the other hand, was bolstered slightly by the day’s Eurozone Consumer Price Index (CPI) report. While this met preliminary scores of 0.4% month-on-month and year-on-year, it was reassuring for markets to see that Eurozone inflation was indeed emerging further from stagnation.

The GBP EUR exchange rate is currently trending in the region of 1.10 – a multi-year low – and has little hopes of returning to the 1.16 levels recorded prior to the recent escalation of ‘hard Brexit’ fears.

The GBP USD exchange rate also recorded losses on Monday, taking the Pound back down to the 1.21 level against its US counterpart.

(Published 07:00 BST 16/10/2016)

The Pound Euro 2016 forecast sees the pair slipping lower before the end of the year, despite its recent plummets, as more concrete Brexit plans are sure to weigh on Sterling recovery. GBP may also be becoming increasingly impervious to solid UK data, according to some analysts.

GBP EUR trended largely flatly last week. While the pair briefly dropped to a new seven-year-low of 1.09 on Tuesday, it quickly recovered and trended closely below the week’s opening levels of 1.11 towards the end of the week.

Pound Limp as ‘Hard Brexit’ Jitters Weigh Heavily on GBP Demand

Any attempt made by Sterling for a sustained recovery last week was largely undermined, as UK markets were sent into panic mode once again thanks to decreasing hopes that Britain can maintain access to the European Union’s single market after the Brexit process.

Despite continued warnings from EU officials, such as Donald Tusk, that a ‘hard Brexit’ is the only kind of Brexit possible, many in the foreign exchange market held out hopes that Britain keeping access to the single market was somehow still possible.

Some analysts have said that the realisation of what a Brexit truly means has only just hit certain parts of the market. Bringing up the old ‘have your cake and eat it’ saying, Tusk stated on Friday;

‘The brutal truth is that Brexit will be a loss for all of us. There will be no cakes on the table. For anyone. There will be only salt and vinegar.’

This narrative has kept a strong ceiling over Sterling trade. While ‘hard Brexit’ concerns cooled slightly later in the week, demand for the currency was not enough to see GBP move in any way besides limply.

Euro (EUR) Struggles to Advance on Solid Data Due to Bullish USD

The Eurozone saw a slew of decent economic data published throughout last week’s session. However, despite this the currency has struggled to hold its ground. This is due largely to a soar in demand for the Euro’s biggest rival currency, the US Dollar.

The US Dollar’s consistent advances last week left the Euro weaker. As a result, it often trended flatly even against a weak Pound.

Friday’s Eurozone trade balance data for August was too light to offer the shared currency any support, despite impressing by improving from 20b to 23.3b in its seasonally adjusted print.

Euro trade was also weakened by heating up speculation on what action the European Central Bank (ECB) will take in its meeting next week.

Rumours that the ECB could be tapering its quantitative easing program earlier than expected have stoked hopes in markets. This also means that hints from ECB officials that QU tapering is unlikely to happen have left the Euro weaker.

Unlike last week, the coming week will see a large slew of British data decorating its economic calendar.

This could continue to indicate one of two things; either Sterling trade is becoming increasingly reliant on political or Brexit news for its movements, or the currency is still influenced by economic news despite recent speculation to the contrary.

It should be noted right away that next week’s UK Consumer Price Index (CPI) scores for September may not give Sterling much support even if inflation experiences an uptick.

The Bank of England (BoE) has previously stated that an uptick in consumer prices is to be expected after Sterling’s fall in value. On Friday, the BoE reiterated that it will overlook an increase in CPI caused by Sterling value. As a result, strong inflation results will not affect BoE monetary policy bets as it usually does.

Other UK data due throughout the week, including employment stats on Wednesday and retail sales results on Thursday, could inspire a Sterling recovery from its weakest level if they impress, however.

While the Eurozone’s final September inflation stats will also be published next week, Eurozone markets will have their eyes set on the European Central Bank’s (ECB) upcoming October meeting.

Speculation is rife that the ECB will discuss tapering off its quantitative easing program and returning to normalised monetary policy. This is one of the reasons for the Euro’s mixed movement last week, so if rumours prove true the Euro could soar – but if the bank reasserts its intention to leave QE active until its natural conclusion the Euro could plummet.

The Pound Euro 2016 forecast sees the exchange rate continuing to trend with a downside bias in coming months, as developments in the government’s Brexit plans will continue to hit market hopes of the UK somehow escaping from its supposed commitment to a Brexit.